apply the theories of demand and supply to NIKE Inc. to see if the theories hold in the real world.

Theories of demand and supply to NIKE Inc

The law of demand and supply is the one that describes the relationship [p between the prices , the quantities supplied and demanded at a particular period of time . It holds that when prices rise , the quantity demanded decreases whereas the quantity supplied increases Consequently , when prices fall , the demand for a commodity increases but the supply decreases . This is the universal law of demand and supply The demand and supply curve is illustrated below showing the equilibrium price and quantity

Price

15

dd ss

10

5

5 10 15 20 Quantity

The equilibrium price is 10 whereas the quantity is 15

However there are instances when prices are constant and only the other variable or determinants of prices vary . In such a scenario , there is either a shift in the demand or supply curve depending on the prevailing circumstances . When supply increases without an increase in price , the supply curve shifts to the right , that is , an increase in supply . In such a case the prices will be forced to fall due to pressure that is mounted on the quantity supplied without a proportionate increase in demand

In the same way , if the quantity demanded increases without a decrease in price , the demand curve shifts to the right indicating that the prices will be forced to rise as pressure mounts on the little supply available in the market . This is the economic explanation of the behavior of demand and supply when any of the variables affecting either demand or supply changes

The following graph illustrates this explanation

Price

15

13

10

7

5

5 10 15 20 25 30 quantity

The shift in demand to the right causes the price rise to 14 as shown in the diagram . In the same way , the rise in supply shifts the supply curve to the right thus causing the price to fall to 8 . However the joint effect results into a change of equilibrium to a price of 13 and a quantity of 20 . This is just an example to exemplify the way the products of NIKE inc . will respond and how their prices will vary from time to time

The red curves represent the shifted curves . It should not be confused with a movement along the curves . Usually , a movement along the curve is due to a price fall or a price increase . In such a case , it is only the price that quantity demanded that will change . Also , a movement along the supply curve follows from the change in prices that is a fall or rise in the price . The quantity supplied will change proportionately as explained by the law of demand and supply-http /biz .yahoo .com

Nike inc . is a global company that specializes in the manufacture of sports shoes , jerseys , shorts and other sports kits which are supplied and used all over the world . Nike 's market is majorly in the field of sport football and athletics . The advertisements of the...